Headline Developments
SpaceX (private) is set to launch The Pentagon’s next-generation national security satellite to orbit - the first launch with a reused rocket. The launch of the GPS III SV05 for Space Force (below) will take place using the same Falcon 9 rocket booster that launched GPS III SV04 last November. SpaceX has five of the six GPS III satellite contracts, with the sixth (SV02) launched by Boeing and Lockheed Martin’s United Launch Alliance (ULA). For the Space Force, a traditional launch is ~$95m, with the use of a reusable rocket bringing that cost down to as little as $30m (according to various numbers available). Other reusable launch systems, at various stages of development, are Blue Origin (private), Rocket Lab (private), Relativity Space (private), ULA, Europe’s ESA, China’s I-space (private) and Russia’s Roscosmos.
Just as WIRE went out last week we saw the announcement that El Salvador voted to make bitcoin legal tender. This is a first globally and will be a fascinating use case for a country where one-fifth of the country’s GDP consists of remittances from citizens living abroad. This was one of the catalysts for adopting Bitcoin with El Salador’’s President believing bitcoin can see billions of dollars of fees/commission cut from the equation (putting more money in citizens pockets). Once the law goes into effect (in several months), merchants will be required to accept bitcoin as payment and citizens will be able to pay their tax with bitcoin (however USD will remain the primary currency). However, critics claim this is a publicity stunt to distract from the President’s authoritarianism (i.e. the booting of the country’s attorney general and several top judges). Either way, this will be great to watch from the sidelines and who knows, it may spur on other countries - perhaps those with similar personal remittance rates such as in the Pacific (Tonga with 37%), Asia (Tajikistan and Kyrgyz Republic around 28.5%, Nepal at 27%) and Central America (Haiti and Honduras ~22%).
Vodafone (VOD.L) has shifted away from the Ericsson/Vodafone/Huawei oligopoly, selecting six partners to build Europe’s first commercial Open RAN (Radio Access Network) - Dell (DELL), Samsung (005930.KS), NEC (6701.JP), Wind River Systems (private), Capgemini (CAP.PA) Engineering and Keysight Technologies (KEYS). What’s Open RAN? Put simply, RAN is a technology to connect users (mobile phone or enterprise) to the mobile network over radio waves. An Open RAN is open to multiple vendors to provide solution flexibility and increased capability (much like open banking architecture - but for telco). This is particularly important for more advanced applications like vehicle-to-everything (V2X) technology (below) where open systems enable a greater pace of innovation. (picture source: Thales)
Other Developments
Hasbro (HAS) has been busy innovating, firstly signing up with Niantic (private) to develop an AR version of its Transformers franchise. In the game, called “Transformers: Heavy Metal”, you will be able to team up with Bumblebee and the Autobots in the real world thanks to Niantic's Lightship AR multiplayer platform. Secondly, Hasbro is bringing Nerf to VR, announcing the multiplayer Nerf Ultimate Championship is coming to Facebook’s (FB) Oculus Quest in 2022. The game arms players with new and old Nerf blasters for team-based combat in Nerf arenas packed with cheering fans. In essence - a VR paintball session in a digital colosseum.
Stripe (private) have announced Stripe Identity which they call the “first self-serve tool of its kind, allowing any online business to begin verifying the identities of their users in just a few minutes, with no code required”. Online businesses frequently need these verification services to comply with age requirements and “know your customer” (KYC) laws. Early users include Discord (to ensure trustworthiness), Peerspace (to reduce fraud) and Shippo (to flag high-risk users).
Separately, the WSJ has reported that Shopify (SHOP) participated in a $1bn raise for Stripe. Shopify has invested ~$350m in Stripe to date whilst partnering with the company on a number of payment solutions across their joint ecosystems. This also comes as Shopify announced an expansion of Shop Pay (its instant check out solution) which is now available to any US merchant that sells on Facebook (FB) and Google (GOOG). The company notes that this is the first Shopify product available to non-Shopify merchants.
Velodyne Lidar (VLDR) has introduced the next generation of its Velabit sensor - a lightweight (125 gram) sensor with a greater field of view (FOV) and accuracy for use in not only automotive but across other sectors such as robotics, industrial automation, infrastructure/smart cities, last-mile delivery and drone mapping/navigation. Expect competition to heat up from incumbents (i.e. Bosch, Denso, Ricoh) and newcomers (i.e. LeddarTech, Ouster, Robosense) as they all target a huge automation market.
Another exciting piece of space news, with NASA’ finishing the assembly of its Space Launch System (SLS) rockets, aiming to return astronauts to the Moon. It is the first time all three key elements of the rocket have been together in their launch configuration. The Artemis-1 mission will launch in November this year, taking an uncrewed Orion spacecraft onboard SLS to the Moon, whilst Artemis-II will fly with a crew in 2023. Prime contractors for the Artemis missions include Northrop Grumman (NOC), Boeing (BA), Jacobs (J), Lockheed Martin (LMT) and their takeover target Aerojet Rocketdyne (AJRD).
Sports betting and iGaming company DraftKings (DKNG) fell over 10% during the week after short-seller Hindenburg Research questioned the company’s future potential and, more interestingly, the questionable gambling practices of SBTech (who merged with DraftKings as part of a SPAC earlier this year). The note doesn’t pull any punches, claiming DraftKings shareholders are exposed to black-market gaming, money laundering and organised crime.
Spotify (SPOT) have just launched live audio app Greenroom marking its first real foray into social media. The app, which mirrors Clubhouse, allows users to host live conversations about music, sport and culture. It will also have native recording, meaning hosts can record their content and distribute them as podcasts. At some point, it’s likely content can be moved to creation software for further editing thanks to another Spotify acquisition, Anchor. Expect similar developments over at Pinterest (PINS) in the coming months as they continue to ramp up their live game (but more live video as opposed to audio).
IPOs | SPACs
South Korean game developer Krafton (private), the company behind the hugely successful Players Online Battleground (PUBG) title (below), is aiming to raise $5b in an upcoming IPO at home. Pricing is expected to be decided in the coming weeks. PUBG has become one of the fastest-selling games since its launch in 2017, with 25m copies sold on PC and gaming consoles. The company will roll out two new titles this year alongside an expansion into other verticals such as web-based cartoons, movies and animation.
Triller (private), the one-time TikTok competitor which has pivoted to live-streamed events (music, wellness, cooking), is preparing to file for a ~$5bn direct listing according to Reuters. The listing will also come after a flurry of recent acquisitions including live streaming platform Halogen Networks, live sports streaming company FITE and conversational AI platform amplify.ai (whose founder and CEO subsequently went on to be CEO of Triller). All of those deals came in the last twelve months and shows a rapid shift in strategy, however, a shift away from TikTok and towards an even more congested sector with Pinterest (PINS), Spotify (SPOT), Snapchat (SNAP), Masterclass (private)....not to mention Facebook (FB), Google (GOOG) and Amazon (AMZN)!
UK FinTech Wise (private) is planning to launch a direct listing on the LSE, with a listing likely later this month following final approvals from regulators. The company, formerly known as TransferWise, were one of the early movers to shake up the international remittance market, offering rates that undercut all of the major banks and payment providers (such as PayPal). The company have expanded to offer various other personal finance services (i.e. debit card) but have seen particularly high growth in the enterprise segment where their architecture powers a range of digital banks (i.e. N26, Monzo, Up) and other non-bank institutions. In this space, enterprise sales are usually critical with the retail market (particularly in regions like Australia) becoming saturated and burdened with poor economics (i.e. high customer acquisition costs, high churn, low lifetime value and high levels of saturation). Wise does stand out in what is otherwise a bit of a “sea of sameness”.
US grocery retailer Boxed (private) is going public, merging with SPAC Seven Oaks Acquisition Corp (SVOK). The company has 7 million users but, as opposed to other delivery companies, is shifting strategy a tad by selling its proprietary software platform to other retailers (i.e. in January they signed a multi-year deal with Japanese conglomerate Aeon Group).
Sprinklr (private), a leading CX management platform, is looking to raise $380m in an IPO valuing the company at around $5b. The company says they sit in a unique “unified-CXM” software category with architecture, AI, platform and data being key differentiators from other CX management platforms. The company saw revenue grow ~20% last year to $340m whilst seeing reasonable improvements to Gross Profit margins (62% to 68% over the period). Taking a group of enterprise SaaS peers (below) on similar growth trajectories, and assuming Sprinklr (the bright green dot below) maintains a similar growth run-rate into 2022, you’ll see that a $5bn price tag is quite fair. In line with Zendesk (ZEN), ServiceNow (NOW) and Workday (WDAY), but a sharp discount to Atlassian (TEAM) and C3.ai (AI). Expect it to pop a little on debut.
Over to China now, with ride-hailing giant Didi (private) set to hit US markets, expected to raise $10bn and set a valuation of up to $100b! This would make Didi the biggest Chinese share offering in the US since Alibaba’s $25b raise in 2014. It would also be a significant boost for some of its major shareholders including Softbank (21.5%), Uber (12.8%) and Tencent (6.8%). According to the filing, the company has 493m annual active users and 15m annual active drivers who helped generate $20.3b in revenue (down 10% YoY due to Covid and in-line with 2018). By comparison, Uber has 93m “monthly active platform consumers” and 3.5m drivers who helped pull in ~$11b in revenue last year. As you can see below, Didi’s ambitions are huge, targeting 24% of global shared mobility and 29% of global EV share by 2040. You can see how they’re aiming to do this by glimpsing their investment portfolio which includes AIWAYS (EV/autonomy), Neuron mobility (e-scooters), AutoAI (AVs), RenRenChe (used car sales) and Grab (ride-hailing/delivery).
Full Truck Alliance (private), China’s Uber/Didi for trucks, has announced pricing for its upcoming NYSE listing - targeting a valuation as high as $20.6b. The company has 2.8m truckers and 1.3m shippers on its platform who helped pull in $395m in revenues last year (that’s up ~4% on the previous year). In the US, this market is being tackled by Uber, plus startups like Convoy (private) who have pulled in $665m in funding to date from Jeff Bezos, Marc Benioff, Al Gore and Bill Gates. Done right, this business model has considerable upside and it’ll be interesting to see how Convoy and Uber Freight track over the coming years.
Medical data company LinkDoc (private), backed by Alibaba (BABA), filed for a US IPO this week. The company has built China’s largest data repository for oncology, enabling data-driven solutions and precision medicine for patients across their treatment journey. This integrates physicians, hospitals, pharma and insurers to ensure timely and accurate solutions to optimise outcomes for patients (see below). Revenues doubled to $144m in 2020, with operating losses narrowing from $52m to US$32m over the course of the year. At present, the company has over 330 collaborating hospitals, 169 life sciences partners and over 2.5m longitudinally tracked patients. This takes the concept of telemedicine and AI to provide a glimpse of what a more ubiquitous health system will look like. Expect similar business model development from guys like Teladoc (TDOC), Amwell (AMWL) and others.
M&A | Cap Raise | Earnings
Relativity Space (private) has just closed a whopping $650m Series E raise from Fidelity, Tiger Global, Mark Cuban, Jared Leto and ten others. The funding will enable the continued development of its fully reusable 3D printed rocket, Terran R, and other long term infrastructure developments. The rocket will be capable of launching 20,000 kgs to Low Earth Orbit (LEO) starting in 2024. The Terran R will be outfitted with 7 Aeon R rocket engines capable of 302k lb of thrust each (vs 500k lb thrust for Aerojet’s AR1 and 221k lb thrust for SpaceX’s Merlin 1D). Relativity Space has also developed their own patented 3D printers, called Stargate, central to their Factory of the Future and capable of building a rocket from scratch in 60 days.
Kodiak Robotics (private) has attracted investment from Bridgestone (5108.JP) as part of a broader partnership to test and develop smart tire technology. Under the partnership, Kodiak will use Bridgestone’s sensor-laden tires and fleet management system on its self-driving trucks which are doing test runs between Dallas and Houston.
Heliogen (private), who concentrate sunlight into a 1,500℃ solar furnace, have raised over $100m to continue testing and the technology with a number of mines and refineries. The technology takes an array of computer-controlled mirrors (HelioMax) and concentrates that energy into a beam which is received at a tower, converting it to ultra-high temperature heat (HelioHeat) creating 100% green fuels like hydrogen (HelioFuel). The applications are wide, including cement, steel, mining, petrochemicals, waste treatment, transport, heavy equipment and household heating.
Crypto asset manager Bitwise Asset Management (private) is adding some Wall Street star power to its cap table with Henry Kravis (KKR), Stanley Druckenmiller (Duquesne Capital), David McCormick (Bridgewater) and Daniel Loeb (Third Point) some of the investors participating in a $70m Series B round. Bitwise manages the world’s largest crypto index fund, the Bitwise 10 Crypto Index Fund (BITW), with $1.2b under management as of 1Q21. Interestingly, a number of Facebook (FB) execs have also jumped on board including Carolyn Everson (FB VP of Global Business), Asha Sharma (Head of Messenger) and Fidji Simo (Head of FB App). A little peek below at the Bitwise 10 allocations.
Have a great week.
Charlie
LinkedIn or E-Mail (cnave@granitebaycap.com)
Granite Bay Capital is an innovation focussed investment company with a deep focus on the companies at the leading edge of innovation across major themes such as AI, ubiquitous computing, sustainability, automation and longevity. Any views expressed in this article are those of the author(s) and do not constitute financial advice.